Desire to own a home continues to increase

MBSauthorityHousingFirst-time home buyers are just 32 percent of all purchases, according to the National Association of Realtors, but more are on their way as sentiment among that group towards owning a home is improving.

The share of buyers saying their primary reason for buying was the simple desire to own a home rose overall and most dramatically among first-time purchasers.

“There are several reasons why there should be more first-time buyers reaching the market, including persistently low mortgage rates, healthy job prospects for those college-educated, and the fact that renting is becoming more unaffordable in many areas,” said Lawrence Yun, the Realtors’ chief economist. “Unfortunately, there are just as many high hurdles slowing first-time buyers down. Increasing rents and home prices are impeding their ability to save for a down payment, there’s scarce inventory for new and existing-homes in their price range, and it’s still too difficult for some to get a mortgage.”
Debt was the primary reason cited by first-time buyers for the delay in home ownership. They said debt kept them from saving for a down payment for at least three years. More than half of those citing debt pointed to student-loan debt as the main culprit.

While debt continues to stall younger buyers, their attitude toward home ownership appears to be making a dramatic move. Sixty-four percent of first-time buyers surveyed said their primary reason for purchasing was the “desire to own.” That is up from 53 percent just one year ago. For repeat buyers, ownership tied with the desire for a larger home. The view of home ownership as a good investment also moved slightly higher to 80 percent; 43 percent of those surveyed said they see housing as a better investment than stocks.

A few things that have not changed in housing — the median age of buyers (31), sellers (54), and the share of multigenerational households buying (13 percent), according to the Realtors survey. Builders have been focused on what they see as growing multigenerational housing demand, adding separate entrances and second kitchens.

Today’s buyers are using the websites and mobile apps at an ever-increasing pace to find their potential purchases. They are also moving faster, buying in an average 10 weeks compared with 12 between 2009 and 2013. The median time on the market for recently sold homes stayed at four weeks for the second-straight year. This is far less time than historical norms and is due to the still very low inventory of homes for sale that plagues most of the country.

What Happened to Rates Last Week?


Mortgage backed securities (FNMA 3.50 MBS) lost -12 basis points (BPS) from last Friday’s close which caused fixed mortgage rates to move slightly higher from the prior week.

We had a holiday-shortened week (closed for Veteran’s day) with only four trading sessions. Overall, we moved in a very narrow range and found a temporary floor of support that was tested a few times and it held which is a little encouraging after selling off the entire month of November.

We had a mixed bag of economic data but overall the trend remains that we have economic growth and even though it is slow going, the sentiment among long-bond traders has been gradually shifting more towards a higher probability of a Fed rate hike in December.

A good example of this “mixed bag” of economic data are Retail Sales vs. Consumer Sentiment. We had a very strong Consumer Sentiment reading but a tame reading where it counts….when then spend their money…Retail Sales.

Retail Sales: The top of the economic pyramid was weaker than expected (0.1% vs est of 0.4%) but fundamentally remain solid and still showed growth on a month-over-month basis.. Core sales rose a respectable 0.3 percent which hits the consensus. There are solid gains including housing-related components of furniture & home furnishings and building materials & garden equipment. Non-store retailers also showed a strong gain as do restaurants.
Year-on-year rates really tell the story especially a respectable plus 4.1 percent rate for sales excluding gasoline stations, a component that is down 20.1 percent and has been badly skewing total sales all year. Total sales are up only 1.7 percent.

Consumer Sentiment: The preliminary November reading was much stronger than expected (93.1 vs est of 91.5). Expectations are especially showing life, up 3.5 points to 85.6 which is the best since June. Strength in expectations points to confidence in the outlook for the jobs market and, to a lesser degree, for the stock market as well. The assessment of current conditions is also higher, at 104.8 for a 2.5 point gain and pointing to strength in the current jobs market. Inflation expectations are moving lower, at least for the 1-year outlook which is down a steep 2 tenths to 2.5 percent. This reading is a reminder of how weak inflation reports are coming in, including today’s data on producer prices. But longer term expectations are stable, unchanged and also at 2.5 percent for the 5-year outlook.

Both Wholesale and Business Inventories were much stronger than expected in September. This will cause economists and traders alike to upwardly revise their estimates for the first revision to the previously released 3rd QTR GDP data.

What to Watch Out For This Week:


The above are the major economic reports that will hit the market this week. They each have the ability to affect the pricing of Mortgage Backed Securities and therefore, interest rates for Government and Conventional mortgages. I will be watching these reports closely for you and let you know if there are any big surprises.

It is virtually impossible for you to keep track of what is going on with the economy and other events that can impact the housing and mortgage markets. Just leave it to me, I monitor the live trading of Mortgage Backed Securities which are the only thing government and conventional mortgage rates are based upon.

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Taff Weinstein
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Cell: 832-794-2136

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Houston, TX 77009
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